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How Venture Capitalists and Government Can Promote Entrepreneurship

MOUNTAIN VIEW, CA - JANUARY 12:  California governor Arnold Schwarzenegger meets with Entrepreneur

I’ve recently met with several universities, nonprofits, and government employees who’ve all asked the same question: how can we promote entrepreneurship?  Just like me, they’re distressed about the poor economy and jobs situation.

By contrast, as a venture capitalist, I can report that almost all of our portfolio companies are desperate to hire talented software engineers, and eager to hire in a range of other roles. It’s a bit surreal to talk with friends in other industries who are having difficulty finding jobs, when in my little corner of the economy, it feels like an oil boomtown.

The first and primary role of a government is to provide basic public goods competently.  To the extent that the government fails to do that, it will retard job creation. Like many Americans, I’m disappointed that our government sometimes fails to do this.  Above all, I’d like our friends in government and the policy world to figure out how the US government can deliver what it’s supposed to but sometimes doesn’t: sound money; an affordable budget; effective education; functioning infrastructure (e.g. airports, less-intrusive airport security); functional legal system (tort reform); logical immigration reform; comprehensible regulation; and a functional tax system (tax simplification).  To Mayor Bloomberg’s credit, he is using his bully pulpit for exactly this purpose, e.g., decrying US immigration policy as ‘national suicide’.  Sadly, he doesn’t control our immigration policy.

There are a range of organizations that help address issues in the technology ecosystem, including but not limited to: Women in Technology, Technology Policy Institute, New York Technology Council and various other state technology councils, Center for Policy on Emerging Technologies, Information Technology Industry Council, Silicon Valley Leadership Group, Tech Policy Central, etc. I support their goals of making entrepreneurship accessible to those who have the ingredients to become a successful self-starter. Like virtually the entire tech industry, I am particularly in favor of Startup Visa, which has the goal of stimulating our domestic startup community through acts to keep our foreign-born entrepreneurs in the United States.

Following is a list of some of the policy initiatives I’ve working on, to various extents.  If you see something that piques your interest and want to get involved, please contact me.  I have ranked this list in ascending order of cost (defined as combined time and money).

–       Educating the VC/angel community on the city/state resources available to them to build companies. I’ll likely organize a Harvard Business School Angels of NY event on this topic in 2012.

–       Studying best practices of VCs in supporting portfolio company operational improvement. I am now leading a Columbia MBA team (ex-Mckinsey and BCG) on a study regarding best practices of VCs in supporting portfolio company operational improvement.  This is effectively a sequel to my study of best practices in deal origination, published last year in the Journal of Private Equity, Harvard Business Review, Institutional Investor, and Business Insider. You can see preliminary results of this value creation study below.

–       Encouraging non-US companies to set up operations in the US. As the former CEO of an Israeli startup with a (modest) US and UK presence, this is an obvious way to create more jobs here. Organizations like Worldwide Investor Network and the US-Israel Business Council are helpful in this area. We have four non-US portfolio companies, many of which have or will soon have employees in the US.

–       Creating angel groups with other alumni organizations, using Harvard Business School Angels as a model, e.g., alumni of major NY schools (Columbia, NYU) and institutions (McKinsey, Goldman Sachs).  I’ve talked informally with some universities about doing exactly this.

–       Creating a for-profit business with the goal of helping students conduct research projects for businesses, so that they’re more connected with potential employers.  I wrote a blog post on this. I’m looking for someone who wants to lead this.

–       Organizing events for local mid- to large-company CIOs / CEOs to meet technology startups, in order to help startups get traction and keep their momentum going.  HBS Angels will likely execute this in 2012. We’re now actively seeking corporate sponsors who want to connect with pertinent companies in the local market.

–       Publishing notes on local tech events. New York has an extremely active Meetup culture; almost every night there are 3-10 tech-focused events.  However, no one systematically provides notes/videos of these events.  Here’s a win-win way to address this: recruit a team of students who would attend these events and publish their transcripts/videos, so that everyone learns more and faster and can network more easily.  I’m already doing this on an experimental basis on my blog.

–       Publishing research. Part of our strategy as a VC is to do in-depth research on the questions that interest us, in order to make us smarter and to help improve industry best practices.  We typically do this by partnering with graduate student teams.  The operational improvement research study I mention above is an example of this.  In particular, we think it would be helpful to the ecosystem if someone were to publish research on who are the most active and most successful New York-area angels, superangels, and early-stage VCs, in order to identify the leaders with whom entrepreneurs should most want to work.  (it is likely that ‘active’ and ‘successful’ are not synonymous.)

–       Creating a master operating checklist for New York entrepreneurs. Visualize a grid, with the standard entrepreneurial steps down the y-axis (ideation, market research, incorporation, etc.), and the major New York industries across the X-axis (internet, food, retail, fashion, etc.).  It would be valuable to have checklists for all of the intersections in this grid.  We’ve created some but not all of these checklists for the tech industry; see our presentation notes and links on our resources page.  Other useful checklists we’ve identified include Biztree, Wickedstart, Goodwin Founders WorkbenchAmerican Express Open Forum Crash CoursesStartupToDo , Entrepreneurcountry, and StartupPlays.

–        Organizing angel pitch nights focused on special-interest communities, including industries (healthcare, retail, fashion) and affinity groups (Women, Asian-American, Latino, LGBT, African-American).  I am now talking with some affinity groups in these domains about co-organizing such pitch nights  under the umbrella of HBS Angels.  Our goal is to source and fund great entrepreneurs, regardless of personal, industry, or academic background. HBS Angels is holding a pitch night focused on healthcare companies on February 29, sponsored by a Fortune 500 medical technology company, and are working on a series of programs for investors to meet African-American and Hispanic entrepreneurs. Details to come.

Here are some much more ambitious and expensive ideas:

–       Setting up a ‘virtual seastead’, perhaps on UN headquarters territory, for high-quality entrepreneurs who do not have US visas. A team in California is already creating a offshore seastead for non-US citizens who want to build companies in the US.  The UN headquarters in New York is technically located on ‘international territory’.  I’m sure there are already some for-profit businesses there, e.g., restaurants.  I wonder if it is possible to set up an apartment building near UN HQ as a virtual seastead?  I’m unclear whether this legal arbitrage is possible. Is anyone else looking into this?  I spoke with the Seasteading Institute, who are looking into this idea.

–       Launching a seastead accelerator offshore from New York.

What other policy initiatives should the venture community be working on?

(Image by Getty Images via @daylife)

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